E-Z-GO 1999 Annual Report Download - page 50

Textron had both fixed-rate and variable-rate loan commitments totaling $1,134 million
at year-end 1999. Because interest rates on these commitments are not set until the loans
are funded, Textron is not exposed to interest rate changes.
A portion of Textron Finance’s business involves financing the sale and lease of
Textron products. In 1999, 1998, and 1997, Textron Finance paid Textron $1,260 million,
$980 million, and $736 million, respectively, for receivables and operating lease equipment.
Operating agreements with Textron specify that Textron Finance generally has recourse to
Textron with respect to these purchases. At year-end 1999, finance receivables and operating
lease equipment of $841 million and $69 million, respectively, ($540 million and $77 million,
respectively, at year-end 1998) were due from Textron or subject to recourse to Textron.
Included in the finance receivables balance guaranteed by Textron are past due loans of
$72 million at the end of 1999 ($55 million at year-end 1998) that meet the non-accrual
criteria but are not classified as non-accrual by Textron Finance due to the guarantee from
Textron Manufacturing units. Textron Finance continues to recognize income on these
loans. Concurrently, Textron Manufacturing is charged for their obligation to Textron
Finance under the guarantee so that there are no net interest earnings for the loans on a
consolidated basis.
Textron Finance manages finance receivables for a variety of investors, participants and
third party portfolio owners. The total managed finance receivable portfolio, including owned
finance receivables, was $6,825 million and $4,509 million, respectively for 1999 and 1998.
Textron Finance’s finance receivables are diversified geographically across the United
States. There are no significant industry or collateral concentrations at the end of 1999.
4. Inventories are carried at the lower of cost or market.
January 1, January 2,
(In millions) 2000 1999
Finished goods $ 608 $ 483
Work in process 970 878
Raw materials 489 454
2,067 1,815
Less progress payments and customer deposits 208 175
$1,859 $1,640
Inventories aggregating $1,051 million at year-end 1999 and $1,008 million at year-end
1998 were valued by the last-in, first-out (LIFO) method. (Had such LIFO inventories been
valued at current costs, their carrying values would have been approximately $174 million
and $170 million higher at those respective dates.) The remaining inventories, other
than those related to certain long-term contracts, are valued generally by the first-in,
first-out method.
Inventories related to long-term contracts, net of progress payments and customer
deposits, were $181 million at year-end 1999 and $178 million at year-end 1998.
5. Revenues under fixed-price contracts are generally recorded as deliveries are made. Certain long-
term fixed-price contracts provide for the periodic delivery after a lengthy period of time over
which significant costs are incurred or require a significant amount of development effort in
relation to total contract volume. Revenues under those contracts and all cost-reimbursement-
type contracts are recorded as costs are incurred. Revenues under the V-22 production contract
with the U.S. government, which presently is a cost-reimbursement-type contract, are recorded as
costs are incurred.
Certain contracts are awarded with fixed-price incentive fees. Incentive fees are considered
when estimating revenues and profit rates, and are recorded when these amounts are reasonably
determined. Long-term contract profits are based on estimates of total sales value and costs at
completion. Such estimates are reviewed and revised periodically throughout the contract life.
Revisions to contract profits are recorded when the revisions to estimated sales value or costs are
made. Estimated contract losses are recorded when identified.
Long-term contract receivables at year-end 1999 and 1998 totaled $156 million and
$166 million, respectively. This includes $112 million and $102 million, respectively, of
unbilled costs and accrued profits that had not yet met the contractual billing criteria.
Long-term contract receivables do not include significant amounts (a) billed but unpaid
due to contractual retainage provisions or (b) subject to collection uncertainty.
Long-Term
Contracts
Inventories
48 Consistent Growth